Gold bullion traded lower on New Year's Eve, but the market saw its biggest gain in 28 years in 2007 with the spot price less than $20 an ounce from hitting historic highs.
Bullion's spot price jumped more than 30 percent this year as a slide in the dollar, record high oil prices, credit market turmoil, falling US interest rates and geopolitical tension boosted the safe-haven appeal of gold.
The precious metal did a fresh sprint last week as weakness in the dollar and tensions in Pakistan following the assassination of opposition leader Benazir Bhutto led to speculative buying.
"Certainly we are looking for a test of $850 very early in 2008," James Moore, analyst at TheBullionDesk.com, said, referring to the historic high set for spot gold in 1980.
"All the supportive factors are still there," Moore said. "The dollar is very much under pressure and we have got geopolitical tensions. There is going to be some reallocation of money next year and certainly gold is going to get a favour, as a market to move 30 percent in one direction is going to raise attention."
Standard Bank sang the same tune in a report about gold: "Expectations are for higher peaks to be achieved in the new year as the unrelenting strength does not look like it will abate anytime soon."
In Monday's European trade, spot gold hit a seven-week high of $843.20 an ounce. By afternoon trade in New York, it was down to $833.50/834.10, compared with Friday's late quote of $837.80/838.50.
In the futures market, the most-active gold contract for February on the New York Mercantile Exchange's COMEX metals division ended down $4.70 at $838 an ounce, after rising almost 25 percent on the year.
"This marks the sixth consecutive year of positive returns and consequently represents the longest gold price rally in history," Deutsche Bank said in a report.
Gold hit a record high in January 1980 on high inflation linked to strong oil prices, the Soviet intervention in Afghanistan and the effects of the Iranian revolution.
After adjusting for inflation, that level was equal to $2,079 at 2006 prices, according to industry estimates. Last week's safe-haven buying was sparked by the political crisis that befell the nuclear-capable Pakistan after Bhutto's killing.
Electoral officials hold an emergency meeting on Monday to decide whether Pakistan will go ahead with a January election that is aimed at shifting the country from military to civilian rule. The dollar fell against a basket of major currencies on Monday, keeping the US currency on track for its worst annual performance in four years, as investors speculate that 2008 may bring slower economic growth and lower interest rates.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also seen as a hedge against oil-led inflation.
US crude settled 2 cents down at $95.98 a barrel on Monday after gaining about 60 percent for the year to mark its biggest annual profit in a decade.
Among other precious metals, spot platinum was quoted at $1,520/$1,525, against New York's late Friday trade of $1,534/$1,538 and last week's record high of $1,542.
Spot silver was at $14.77/14.82 an ounce, compared with New York's late Friday quote of $14.72/$14.77. Spot palladium fetched $368/$371, against Friday's $363/$366.